Experts Explain: What are the long-term economic trends to watch?

Summary

The global economy is undergoing profound changes driven by geopolitical shifts, demographic trends, and advancements in AI. Trade fragmentation, marked by protectionism and 'friendshoring,' is reshaping global relations, especially between major players like the US and China. As the world’s population grows, an ageing workforce in wealthy nations contrasts with a young, expanding labor force in regions like Africa and Asia. Meanwhile, generative AI is poised to enhance productivity, but it requires a workforce capable of leveraging this technology. The future of our economy will be shaped by adapting to these transformations, demanding both innovation and skills development.

Takeaways

• 😀 The global economy is undergoing a period of unprecedented uncertainty and transformation, with significant changes driven by geopolitical shifts, trade relations, and AI advancements.
• 😀 While some geo-economic fragmentation is happening, there is no full de-globalization yet, though global trade dynamics are being reoriented, particularly due to the US-China trade tensions.
• 😀 Protectionism and tariffs are leading to long-lasting changes in global trade patterns, contributing to fragmentation and re-aligning trade relationships along geopolitical lines, such as 'friendshoring'.
• 😀 Despite the media focus on US-China trade tensions, bilateral trade between these two countries only accounts for 3% of world trade, which illustrates the disproportionate attention they receive.
• 😀 The world’s population is projected to grow to 9.7 billion by 2050, with major regional differences such as sub-Saharan Africa's population doubling and Europe's declining population.
• 😀 The global aging demographic, particularly in Europe and Eastern Asia, is creating challenges in workforce availability, especially in healthcare, accounting, and specialized trades.
• 😀 Businesses are facing barriers to growth due to a shortage of skilled workers, with 63% of businesses citing difficulty in attracting the right talent as their biggest growth challenge.
• 😀 Upskilling and mobility are key to addressing the global worker shortage, allowing workers to advance in high-demand sectors such as healthcare and finance to avoid job attrition.
• 😀 Generative AI is changing the definition of productivity, focusing on producing better with fewer resources, and has the potential to enhance efficiency and eliminate certain tasks.
• 😀 By 2025, 86% of businesses believe AI will have the greatest impact on their operations compared to other technological trends, such as robotics and quantum computing.
• 😀 Despite uncertainty, experts agree that AI will likely contribute significantly to global economic growth, possibly adding $4.4 trillion annually, but it will require workers to adapt and incorporate the technology to realize its full potential.

Q & A

What is the global economy currently facing?

The global economy is undergoing a phase of unprecedented uncertainty, marked by massive transformations in trade, demographics, and technology, particularly artificial intelligence.

How is artificial intelligence affecting the global economy?

AI is not new, but its consumer orientation is. It is transforming productivity, enabling businesses to do more with less, and reshaping industries, with generative AI alone contributing $4.4 trillion annually to the global economy.

What are the main drivers of change in the global economy?

Key drivers include shifting trade dynamics, demographic changes, geopolitical shifts, and advancements in artificial intelligence. These factors are leading to redefined economic patterns and increased fragmentation.

How is protectionism influencing global trade?

Protectionism, especially through tariffs, is causing a long-lasting shift in global trade patterns, creating fragmentation. This is evident in the US-China trade relations, where trade has slowed compared to third-country trade.

What is 'friendshoring'?

'Friendshoring' refers to the practice of countries prioritizing trade with nations they consider allies, based on political or strategic relationships, rather than purely economic interests.

How will demographics impact the global workforce by 2050?

By 2050, the global population is expected to reach 9.7 billion. Sub-Saharan Africa's population will double, while Europe's will shrink. Additionally, the aging population, especially in Europe and Eastern Asia, will challenge workforce sustainability and healthcare systems.

What is the impact of an aging population on industries?

The aging population is creating a shortage of workers in essential sectors like healthcare, accounting, and construction. To address this, upskilling, making jobs more attractive, and fostering talent mobility are crucial.

How is generative AI redefining productivity?

Generative AI is pushing the concept of productivity from 'doing more with the same' to 'doing better with less.' AI tools can help automate tasks, boost efficiency, and increase output quality, which may improve overall economic performance.

What role does upskilling play in the evolving economy?

Upskilling is vital for ensuring that workers are equipped to adapt to new technological tools, especially in sectors like AI and healthcare. Companies that invest in worker development will help maintain a resilient workforce amidst economic shifts.

How do economic experts view the future of AI's impact on productivity?

Economic experts believe that AI will bring faster improvements in productivity than previous technological advancements like computers. While it is difficult to predict precisely, there is confidence that AI will enhance efficiency and contribute positively to economic growth.